Two separate Michigan federal judges refused to toss out United Wholesale Mortgage’s All-In litigation filed against two separate brokerages.
Atlantic Trust Mortgage and District Lending, sued by UWM for breaking its ultimatum, had their dismissal requests rejected in the U.S. District Court for the Eastern District of Michigan, Southern Division, less than a week apart.
Both judges overseeing the two lawsuits ruled that Atlantic Trust and District Lending were bound by the wholesale broker agreement with UWM, despite not signing the ultimatum, because they continued doing business with the Pontiac, Michigan-based company.
Months earlier, Florida-based mortgage brokerage Atlantic Trust and Arizona-based District Lending asked the court to toss the suits, arguing they never signed an amendment to UWM’s agreement in 2022, and thus the legal actions should be permanently scrapped.
The controversial amendment prevented brokers working with UWM from doing business with Rocket Mortgage or Fairway Independent Mortgage. As of February 2024, Fairway has exited the wholesale channel.
UWM, Atlantic Trust and District Lending did not immediately respond to a request for comment.
Regarding Atlantic Trust, litigation claims that at the end of 2022, UWM was trying to win back Atlantic Trust’s business by offering a free 60-day trial before it left the partnership. Following that free trial, the mortgage broker did not officially renew the agreement, but sent an additional 87 loans to the top-wholesale lender, litigation claims.
If Atlantic Trust did not agree with the proposed amendment, it could’ve terminated the agreement or stopped submitting mortgage loan applications to UWM following the 60-day trial, the recent filing by a federal judge reads.
Atlantic Trust’s interpretation “failed to persuade the court otherwise,” Judge Terrance Berg added, explaining why the suit is not being tossed.
“The court agrees that UWM has sufficiently alleged that the All-In addendum is an amendment to the parties’ 2018 Agreement, pursuant to the terms of that Agreement,” a filing from March 25 reads. “The submission of any mortgage loan applications or mortgage loans to UWM after such amendment shall be broker’s agreement to the amendment without further signature or consent of any kind.”
Originally, UWM filed the suit against Atlantic Trust accusing it of breaching the All-In addendum by sending 71 loans to Rocket Mortgage or Fairway since December 2022, which “intentionally and directly undermin[ed] the entire purpose of the All-In Initiative.”
At the time, a spokeswoman for UWM said Atlantic Trust “is one of the companies who signed a contract and then knowingly breached it, therefore we will follow the agreed upon contract and win damages.” UWM said it’s seeking $355,000 in damages, according to the suit filed Jan. 26, 2024.Meanwhile, District Lending was sued by UWM in December 2023 and faces similar allegations of breaching the wholesale lender’s contract.
The suit claims the independent mortgage broker sent 137 loans to Rocket or Fairway since pledging in March 2021 to abide by UWM’s All-In initiative. The lending giant claims District Lending’s refusal to abide by the agreement has resulted in damages of at least $420,000. A Michigan federal judge, Laurie Michelson refused to toss this suit March 31.
“UWM plausibly alleges that District Lending agreed to the amended agreement, and later breached it by submitting loans to prohibited lenders,” the judge wrote in her ruling. “UWM alleges that, despite having no legal obligation to do so, the parties continued working together after the contract amendment, so UWM has pled sufficient consideration to support its breach of contract claim.”
Other brokerages, including America’s Moneyline and The Okavage Group, that were also sued for breaking UWM’s All-In ultimatum and thereafter countersued, face an uphill battle against the megalender.
A Michigan federal judge tossed AML’s countersuit for fraud in March 2024, citing another court’s decision where a judge earlier that year was unconvinced by The Okavage Group’s similar arguments.
